Bricks and mortarboards

Windows of opportunity: Belgrave House in Bristol has apartments for sale from £275,000 through Knight Frank (0117 943 9850)
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With A-level results imminent, thousands of parents are coming to terms with the departure of a son or daughter to university. For many parents, the first question is: where will my child live? Student accommodation is notoriously hit and miss, sometimes downright dangerous or unhealthy. So why not purchase a safe and secure pad for your offspring, one that can benefit you, too?

This is an option being exercised by more and more parents ( including Tony and Cherie Blair, who famously bought a new apartment in Bristol for their son Euan).

It is not just a handful of rich kids who are getting a head start in the property game. Middle-income parents are raising buy-to-let mortgages and viewing the property as a long-term family investment.

It can make sense all round. Often students are forced into inferior rented accommodation that costs a fortune. While a lucky few may end up with the home as a surprise graduation present, the property can become a pension nest egg for parents.

Some savvy students are becoming landlords themselves, getting a mortgage in their own name and taking in tenants in order to pay their way through college.

For parents, it is wise to decide at the outset whether you are buying purely as a favour to your children or whether you want to keep the property as an asset. This will probably affect your choice of where and what you buy.

In some university towns, demand for rented accommodation underpins property prices. Even if you are not buying for your own children, the student market can be lucrative. By letting rooms to several students, rental income should comfortably cover mortgage costs. This is especially the case in relatively low-value places such as Lincoln, where it is cheap to buy and where the big student population keeps rents up.

Some colleges run a leasing system whereby they take over the property and deal direct with student tenants. This is a good solution for parents who wish to carry on letting after their son or daughter has graduated.

Shared houses are popular, but parents are also snapping up apartments at swanky new developments in London and major cities such as Birmingham. City-centre apartments are easier to maintain, make good resales or can be used as a pied-à-terre.

Berkeley's Hampshire division reports that Portsmouth, Bournemouth and Southampton are popular locations because homes can eventually be used as weekend retreats. Often, parents buy a waterside apartment with the aim of retiring there.

Parents who buy are normally "equity rich, rather than cash rich", according to Charcol, a leading mortgage broker. Some parents are buying property years in advance of their children attending college, in the same way as many people take out school-fee plans when kids are born.

First, it gives parents peace of mind about the standard of accommodation; second, it is a hedge against house-price inflation; third, it gives the child a leg up the property ladder.

It is possible for students to buy in their name only. There are no special lending packages for studentsbut a few lenders (Northern Rock, Abbey National and Royal Bank of Scotland) will grant a mortgage in the name of the student if the parents have sufficient income to act as guarantors.

This means parents are responsible for paying the mortgage in the event of the student defaulting.

The advantage for parents is that they don't have to pay capital gains tax when the property is sold. Moreover, the student is entitled to £4,615 tax-free rental income (assuming no other earnings) plus an extra £4,250 tax-free income under the Government's Rent-a-Room scheme.

Be aware

Property specialists say novices who buy a house for a student child are unlikely to do as well as someone who makes a clinical investment decision when purchasing. Certainly, there are pitfalls. In some cities - Leeds, for example - houses once judged profitable for student lettings have become blighted.

Also, colleges are increasing the supply of accommodation by building new blocks of studio apartments (see below). Moreover, private companies such as Unite are building low-cost city-centre housing specifically for students. This means investors may be up against stiff rental competition.

Some developers are responding specifically to the accommodation needs of students. At City Approach, a Galliard scheme near City University, Angel, 730sq ft apartments are split into two bedsit units with a shared kitchen.

The flats are popular with investors, according to estate agent Thomson Currie. Two student renters will each pay about £120 a week whereas letting the flat to a single occupier for £240 a week would be difficult.

Well-heeled overseas buyers have always dipped into their pockets and bought property for children studying in the capital. Increasingly, London-based parents are doing the same thing. Even if the child is studying somewhere else, the chances are they will end up working in the capital.

Parent purchasing has proved popular at Perspective, an apartment scheme in Waterloo, which is close to all the central-London universities.

Anne Fendi, sales director of Crest Nicholson, says the trend is also strong in tried-and-tested locations such as Highbury, Camden and Maida Vale. Call 01932 840999.

Now is perhaps a good time to act if you are buying for the long term.

Prices have fallen and it is possible to pick up new one-bedroom apartments for much less than £200,000 in up-and-coming areas.

Developer Telford is selling homes at Devons Road Apartments, E3, from £167,000. Call 0870 872 0987. At Abode, in Nunhead, SE15, onebedroom flats start at £175,000. Call developer St James on 020 7732 8082.

Halls of fame

Renting out student accommodation to tourists and conference guests during vacation periods has become a lucrative sideline for London universities.

Colleges argue that the income helps subsidise rents for students. However, critics say many students are being forced to pay for luxury accommodation above their needs.

The London School of Economics happens to be one of the largest hotel operators in the capital, with about 2,500 beds available at several halls of residence. These include buildings in three fashionable locations: Butler's Wharf, Borough Market and Bankside, a few yards from Tate Modern.

LSE students pay between £80 and £110 a week for a room with en-suite facilities, but often are obliged to vacate their home for three months during the summer. The Bankside building operates as a hotel with daily room rates starting at £31.

According to the NUS, students are paying for a higher standard of accommodation than is necessary and that in some cases, it is students who are subsidising tourists - not the reverse.

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